Advance Auto Parts Slumps on Surprise Loss

The auto parts store's decline accelerates as profits evaporate

BREAKING NEWS

Advance Auto Parts stock got hammered in early trading as the company crumbled into a loss for the quarter. Will cost-cutting initiatives be enough here? 

WHAT HAPPENED

AAP has been under pressure all year, but things intensified harshly this morning as the retailer announced they generated a net loss of $48.6 million from the $2.72 billion in sales they logged for Q3. Supply chain costs are still gutting the auto parts industry, and now Advance Auto also has to deal with large inventory reserves that are weighing heavily on their balance sheet. Sure, they generated more sales than the market expected, but AAP just can't escape the 2022 price spiral that hit every other retailer. 

DESPERATE MEASURES

In order to save costs, Advance Auto announced they are looking into divesting from their Canadian business and Worldpac line. With supply issues finally looking like they could improve, AAP is just trying to stem their losses as much as possible while their macro outlook brightens. The market just isn't buying that story right now. 

WHY IT MATTERS

It's been a wild year for anyone related to the auto industry. Supply chains for complex parts are still recovering and Americans are delaying auto repairs and car buying as much as possible to keep ahead of inflation. AAP is getting hit from both sides of this equation, and it's hard to see a clean way out for them. The market can't justify how there seems to be way more questions than answers here, so they dropped AAP 5% in early trading, adding to the 68% the stock has declined in the past year. Brutal.